Innovation can mean many things, but for spirits retailers, innovation in tequila has delivered a growing business with a much more lucrative ring.

As the agave spirit continues to shed its passé image as the quintessential shiver-inducing shot, the category is seeing significant growth in 100% agave expressions (pitched at higher price points) replacing value-priced mixto brands (pure agave tequilas are closing in on 50% of the U.S. tequila market volume and growing fast). Producers, obviously mindful of the way whisky makers pulled their industry out of a slump by focusing on quality and invention, have tapped their own creativity to develop new styles of tequila that move beyond the blanco/reposado/añejo trinity that for so long has represented the heart of the business.

Those innovations come in many forms—higher proof, barrel finishes, aging protocols, even flavored expressions. Take potency, for instance. Most tequilas have logged in at 80 proof recently, but tequila fans, especially bartenders, have been pushing for stronger expressions with a bigger punch and more intense agave flavors. Tequila 1800 has long offered a 100 proof variant, but recent additions at the higher end include the legendary Tapatio, available at 110 proof, and soon Pueblo Viejo will offer a 104 proof expression.

Many tequila makers have already shifted from employing only used American oak for aging. The Milagro Barrel Select line, for example, rests in French oak. Perhaps modeling after Scotch whisky producers, tequila makers also have started seasoning their spirits with barrels used previously for wines and spirits other than whiskey. Herradura is working on its third annual barrel-finished reposado in the Coleccion de la Casa line, in which their 11 month reposado gets two months more aging time, for 2012 in Port pipes, and for 2013 in Cognac barrels. Priced around $90 and limited to fewer than 3,000 cases, a new edition is expected each fall for the foreseeable future, say brand reps.

“We hold ourselves to a very high standard when it comes to exploring with aging and recasking techniques,” says Herradura’s brand manager Valdemar Cantu. “Consumers are finding out that tequila is much more versatile, that it can be as high quality as any other spirit and people are willing to pay more for it when it has that quality. Producers are going back to using more refined techniques, selecting more mature agaves and exploring extra age.”

Revisiting the Barrel

Paying more attention to barrels holds great potential for tequila going forward. “At Patrón we already use a combination of barrels to age our tequilas—including new and used American oak, new and used French oak, and Hungarian oak,” says David Rodriguez, executive production director at Patrón. “And we’re experimenting with a number of different barrels, too, and also at different proof levels.” The company also uses Bordeaux barrels to finish its Gran Patrón Burdeos.

All this experimentation is part of what keeps fervid agave fans engaged, says Grover Sanschagrin, creator of the Taste Tequila phone app, who has also launched a traveling tequila tasting program. “As an uber fan constantly trying things, I’m noticing that there are a lot of big brands that are trying to do stuff that is craft-like, including special editions, and things like the Casa Noble single barrel program, for example, and the Espressiones de Corazón whiskey barrel finishes.”

Whatever the innovation, it’s clear producers are buoyed by their continued success here in the U.S. According to figures supplied by the Distilled Spirits Council (DISCUS), tequila grew 6.6% last year, better than all other main spirit categories, including whiskey overall (some whiskey sub-categories, it should be noted, grew faster than tequila). The agave spirit jumped nearly 10% at the super-premium level, and lost ground only at the mostly mixto value price point. It’s at the higher end where experimentation is most frequent. Super-premium, defined as $20-$40 a bottle, is the fastest-growing tequila segment scored by Nielsen, representing 20% of total tequila value, while ultra-premium ($40+) is the second-fastest growing and represents 22%.

“The tequila category in the U.S. is incredibly robust and dynamic,” says Alex Tomlin, SVP marketing for tequila, gin, Scotch and liqueurs at Diageo North America. “With strong category value growth, the opportunity for distinct and compelling propositions is exciting. The premiumization trend along with consumers’ relatively newfound understanding and appreciation of high-quality tequilas favors strong and differentiated brands that can meet the lifestyles of diverse groups of consumers.”

The confluence of premiumization, continuing growth, new iterations and pressure from brands that catch aficionado attention has created a swelling demand for more, different and better. It’s even showing at the extra añejo level which, after initial enthusiasm when first introduced, seemed to lose steam. Fast-growing Avion launched Avion Reserva 44 late last year with fewer than 1,000 cases worldwide initially. The luxury offering, made from selected agaves roasted in brick ovens for 72 hours, is aged for 43 months in oak and then aged an additional month in petite barrels which are rotated daily.

Meanwhile, Diageo’s recent purchase of the brand DeLéon—a joint venture with Sean Combs—includes an extra añejo variant bottled at a cask-strength 102 proof. DeLéon is only the most recent celebrity-owned tequila. Prior “stars” in the category include Sauza 901 (with Justin Timberlake) and Casamigos, created by George Clooney and restaurant mogul Rande Gerber. The fact that all three tequilas have earned critical acclaim on their own merits bodes well for the category overall.

Updating the Old School

While the shot occasion doesn’t get the attention it once did, Sauza, too, has targeted the concept with Sauza Lime Shot, and has big hopes that their partnership with Timberlake and 901 will also play big in that arena, says Sauza senior director Gary Ross.

Aiming to separate completely from the shot/margarita mentality, Casa Dragones goes as far as to put “sipping tequila” right on the bottle, emphasizing the smoothness that the producer attributes to multiple distillation using pure spring water and “ultra-modern” filtration. Casa Dragones is then hand-finished with a dash of extra añejo (aged over five years in oak); every bottle is handmade from lead-free crystal and then individually engraved with the brand’s signature “pepita” design.

It should come as no surprise that restaurateurs continue to push consumer expectations of what tequila is. Arturo Gomez, president of Chicago’s Rockit Ranch Productions which operates ¡Ay Chiwowa! there, has taken his grandfather’s recipe for spiking blanco tequila with raisins and expanded it, creating infusions with raisin and almonds as well as with prunes to add flavor and depth to the Milagro blanco tequila he serves. At this neighborhood tequila and taco destination, where more than 90 tequilas are offered, as well as house-kegged cocktails like the Black Cherry Basil Margarita.

Gomez says customers count on seeing so many tequila brands available and they are avidly exploring various expressions and brands, paying attention to production, regions and styles. Even at a nightclub his group owns, bottle service for brands like Don Julio 1942, which commands $900 there, are going up.

David Grapshi, who has spent his career working on various tequila brands at Sazerac and now is a private consultant for distillers including Siete Leguas, says he’s been surprised that the larger suppliers haven’t conducted more experimentation, and thinks some may soon develop artisanal brands within their portfolios.

Numerous brands have also started paying more attention to ripeness and sugar levels in the agaves they grow or buy; those with multiple brands will set different ripeness standards and even employ different yeasts in fermentation. Sourcing is increasingly important, especially for brands like Lunazul, which is one of the few widely available estate-grown tequilas. “Now we see more producers sourcing only from their own agave fields and treating production as a single vertical process,” says Reid Hafer, Lunazul senior brand manager at importer Heaven Hill. “Vertical integration has been a huge step. We know from start to finish how the agaves have grown. We know if there has been exposure to anything which might compromise the plants. So, we know what sugar levels to expect and how well the fermentation process will work and, ultimately, we know the quality and flavor will be consistent with each distillation.”

Not every brand has that capability, but any successful producer will need to be more aware of each step of the production, just as whiskey makers have found that increasing a distillery’s expressions depends on keeping the basics consistent. That’s the main improvement in tequila over the past ten years or so, and that consistency is the real key to both the increase in sales and the belief that agave spirits benefit from all the enhancements the industry can conjure.

Novelty Factor

New tequila brands seem to arrive in wave after wave, though word from Mexico is that supply is tightening and some of those brands will have a harder time managing supply. Meanwhile, Diageo’s acquisitions of DeLeón (as part of the joint venture with Sean Combs) and Peligroso mean that most retailers and restaurateurs can expect to be pitched about the brands soon. “They are part of our strategy of creating a collection of superb quality and distinctive tequilas at complementary price points to appeal to a wide range of consumers,” says Diageo’s Alex Tomlin. DeLeón is in the ultra-premium and above price tier and a Hollywood favorite, while Peligroso is primarily a super-premium brand that is rooted in the surfing and action sports culture of Southern California. DeLeón includes an extra añejo variant bottled at a cask-strength 102 proof, while Peligroso includes a cinnamon-flavored expression.

Just released in a new sort of experimental style is Sauza Hornitos Black Barrel, aged for 12 months in new toasted barrels, then transferred to deep charred barrels for four months and finally to toasted barrels (all American oak) for two months to create what the supplier calls whiskey-like notes.

Gran Patrón Piedra—Patrón’s first extra añejo tequila, aged four instead of the three years required by law—is also the first Patrón made entirely using the tahona process in which cooked agaves are crushed by stone; it’s retailing at $400 a bottle.

At the lighter end of expressions, there’s Lunazul Primero, aged 18 months and then filtered eight times which results, the company says, in a balanced and exceptionally smooth and clear anejo. Over the past few years, Lunazul has largely focused its efforts at retail, but the brand has more recently gained attention in bars due to its estate-grown agave.

Coffee flavors are getting the most push lately. There’s Avión Espresso which combines Avión Silver with Italian espresso, creating an ultra-premium espresso liqueur that is lighter in body and viscosity and lower in sugar-level than many flavored spirits. Brand creator Ken Austin says that, like Avion 44 extra añejo, his team is being very careful not to toy with the brand’s hard-won image as a tequila made to exacting standards and with care.

Also in the mix in select markets, Cabo Wabo Diablo, another coffee-flavored entrant. “Flavored and sweeter tequila-based spirits certainly open up a new opportunity for tequila drinkers to see the diversity of the category not only with flavors, but also in aging and mixability,” says Kathleen Schuart, director of marketing, white spirits, Campari America. Cabo Diablo is for those looking to explore the experimental and fun side of spirits, while offering a devilish twist to the night.

Tequila Rose is proving that innovation in the category need not be high-end to make a mark. Their low-alcohol (15%) strawberry cream liqueur “with a splash of tequila” is getting a limited-edition package to grab more attention. Made by McCormick Distilling, the brand also includes “Cocoa” and “Java” iterations. And pushing the tequila envelope into truly novel hybrid territory, two vodka-tequila mash-ups are aiming to gain traction in the market. Vodquila and Vodkila both present a smoother texture than straight tequila. They can be sipped on the rocks with a wedge of lime or mixed in myriad ways.

While few flavored tequilas have really caught fire, Cuervo is encouraged by the response to its recently added variety, Jose Cuervo Cinge, a cinnamon-infused silver. “The infusion of Mexican cinnamon and other spices match perfectly with the clean, crisp agave flavors,” says a spokesperson for importer Proximo Spirits. “This blend of bold flavor, combined with the sweet and natural cinnamon sting, is going to make for an even more exciting shot occasion.”

Finally, Ron Cooper, Del Maguey Single Village Mezcal’s founder, and chef José Andrés and his team at ThinkFoodGroup, have created Del Maguey Ibérico, a mezcal made with ibérico de bellota ham, made from Spain’s legendary acorn-fed, black-footed pigs. The limited release, made in roughly the same manner as pechuga mezcals, in which a chicken breast is suspended in the still during distillation, debuted in Washington, DC, at Andrés’s Oyamel restaurant’s Tequila and Mezcal Festival. Beginning in April, Del Maguey Ibérico will be in limited release and priced at around $200.

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